Euro-Area Orders Continue To Claw
Their Way Backby Robert
Brusca November 24, 2009

Euro-Area orders are still falling year-over-year. As the
chart shows the Yr/Yr drop is being steadily mitigated. Both
foreign-sourced orders and domestic orders (in-region orders) are
rebounding smartly after their recession-induced drop.

Of the EU’s big four economies Germany and France are doing
best with orders surging at stunningly strong 3- and 6-month rates of
growth. Italy’s orders are still falling over both those periods as are
orders in the UK. UK orders, in fact, are dropping at a horrific 31%
annual rate in the three month period ended in Sept. demonstrating a
severe drop off sparked by a 15.1% order drop in the month of August
alone.

Needless to say the Euro-Area, while doing better, remains a
very heterogeneous community. The orders rebound itself, is also not
altogether uniform. The detailed figures revealed September's orders
were driven by heavy transport equipment, such as ships, railway and
aerospace equipment, which tend to be volatile. Excluding heavy
transport equipment, orders dropped 1.2% from August and were 18.2%
weaker than in September last year. Orders for intermediate goods
dropped 2.1% in September from August, but orders for capital goods,
durable consumer goods and nondurable consumer goods all rose.

On balance the orders trends show that the zone is doing
better. As in the US a number of Zone economies did better on the back
of government schemes to boost auto sales coupled with scrappage
requirements; these programs are starting to lapse with some negative
consequences for orders and growth.

For the time being though the Euro-Area is on the mend. The
Markit PMIs showed that both MFG and Services sectors continued to
improve in November. Germany’s IFO report showed continued improvement
in November as well. The Markit data showed the rate of improvement is
slowing down. The bottom line for now is that improvement continues but
the pace of the recovery remains a keen issue and one on which incoming
reports have not been altogether optimistic or uniform. The
backtracking in the UK orders improvement and the slowdown in the
November Markit indices’ improving trends are two recent pieces of
disappointing data.